Wednesday, July 29, 2009

New pressures in the phosphate dilemma

Watching the American phosphate dilemma these days is like watching two trains streaking toward each other on a single track, headed for a wreck.

One locomotive is powered by growing food demand and rising food prices, which leads to a greater need for phosphate fertilizer. As USDA's Economic Research Service explained recently in the March issue of Amber Waves, the jump in food prices from 2006 to 2008 led to a corresponding spike in fertilizer prices. Phosphate prices jumped 93 percent in just 12 months, reflecting high demand and low supplies [Update July 30: In the comments, R points out that the prices fell part way back again after 2008 and suggests that international capacity may respond fully within a few years]. Phosphate inventories fell 27 percent in the most recent data available (2007): "Domestic and foreign fertilizer producers were not able to quickly adjust production as inventories dwindled." These trends generate a huge economic incentive for increased phosphate production.

The other locomotive is fueled by the growing environmental constraints on phosphate mining. As we noted briefly a couple weeks ago, 75% of U.S. phosphate fertilizer comes from strip mines in Florida, and it is not clean work.

Though one can find sources more critical of the mining industry, my favorite source for explaining the complex array of environmental problems is the comparatively industry-friendly Florida Institute of Phosphate Research. Here is where things stand according to FIPR's detailed phosphate primer. Sure, phosphate mining generates radioactive waste, due to radon and other naturally occurring substances, and, sure, the level of radioactivity in most Florida phosphate byproduct waste exceeds EPA limits for agricultural or road-building uses. However, the radioactivity is not very dangerous and probably is not the worst environmental concern from phosphate mining.

The honor of worst environmental concern might go to the air pollution (dust or flouride contaminants), or maybe the water pollution (heavy metals or fish-damaging acidity). Under routine operation using best practices, water contamination can be prevented, FIPR explains. "There is, however, the possibility of an accidental spill like the one that occurred in December 1997 when acidic water from a Mulberry Corporation phosphogypsum stack spilled into the Alafia River." It gets worse: "Improving the quality and reducing the quantity of the process water became an even higher priority for the phosphate industry after the Florida Department of Environmental Protection (DEP) inherited three phosphogypsum stacks with full ponds when Mulberry Corporation (a chemical processing company) declared bankruptcy in January 2001. These ponds contained billions of gallons of acidic water. Two stacks are in Mulberry in Polk County, where there was a spill in 1977 and one was at Piney Point in Manatee County where a spill would endanger Bishops Harbor, a prized estuary."

But, even the spills may not be the most serious environmental constraint. From FIPR's phosphate primer, the worst constraint may simply be the opportunity cost of blighted land that is occupied by the mountains of phosphogypsum waste (1 billion tons in 25 "stacks" in Florida, with 30 million new tons each year) or the thousands of acres of clay settling ponds (occupying 40% of the land area of the extraction operations even after the operation is completed). In FIPR's characteristically understated account of the clay settling ponds: "Research has proven that there are uses for the land, but the uses are limited by the properties of the clay that leave the settling areas unstable. There is a strong public desire to cut down on the number of settling areas created." Indeed, FIPR's phosphate primer perceives growing residential populations, not limited supplies, as the fundamental constraint on increased production in Florida. You can just hear the tone of regret: "There is a deposit around the Boyette area in Hillsborough County, for example, that will likely never be mined because the land over it has been developed."

[Update July 30: An initial version of this post yesterday evening had photographs of a mine, from my recent field trip in Florida, but further investigation shows it may have been a cement or building materials mine. I'll add the photographs back if I can confirm that it was a phosphate mine. Meanwhile, here are links to Florida phosphate mining photographs from a historical archives, a recent class trip, and a stock photo.]

The public relations folks for Mosaic, the largest mining company and a former Cargill subsidiary, avoided mining images in the following video [Update July 30: slightly toned down my description of this video]. Yet, hidden behind all of the orange tree groves and green soccer fields in the video, I think you can probably imagine in your mind the gray wasteland and hear the mechanical roar of the dominant image the film-makers excluded.

I haven't seen Florida phosphate mining in the news much lately. But, watching the trajectory of phosphate fertilizer on the one hand, and environmental constraints in Florida on the other, I'll hazard a prognostication. One way or another, the phosphate fertilizer industry will come to a collision in the next couple years with sufficient force to make the news.

We can think of our impact on resource use and the environment as a function of our population size multiplied by the average impact per person. The happiest route to sustainability would be to let population levels slowly peak and finally decline in the next century with a rising global standard of living, while at the same time using fewer environmental resources per person than current U.S. averages.

That's my dream.

If we don't pursue that path, I would guess that, at some point in the next few generations, our population will be adjusted with our without our permission.

Agree that the environmental footprint of phosphate mining is terrible, and the existing legacy in the U.S. is terrible whether or not current production is expanded (or even continued at current levels).

On the price side, phosphate fertilizer prices have fallen back to 2006 levels (see Figure 3):

http://cropwatch.unl.edu/archives/2009/crop7/fertilizer_prices.htm

Higher prices (past and future) will likely spur incremental supply coming from other parts of the world with lower cash costs of production and environmental restrictions (e.g. North Africa). Overall, the FAO predicts phosphate fertilizers will have surplus capacity by 2011/2012 (see first link and p15, 17 of second link):

Unfortunately, the environmental problems from new mines will likely be similar, but receive even less attention than they would here in the U.S. Outsourcing our environmental footprint is obviously not a good solution at a planetary level.

Parke, I agree that using fewer environmental resources per person is critical; I think the key practical question here is how to incentivize that in the specific case of the global fertilizer market.

Thanks, R, for the better data and the thoughtful comments. I've added another update to the original post, acknowledging the recent price data. Despite the embarrassment of encumbering the post with three updates (argh), perhaps the revised post shows off the efficiently collaborative nature of web-based writing.

Some tentative thoughts: Best thing is to eat with lower environmental impact (especially less meat). Also, good environmental regulation of phosphate mining and remediation worldwide is wise, even if it then makes phosphate fertilizer more expensive. That higher price of fertilizer then feeds a response from farmers who can weigh the production advantages and cost disadvantages of increased application more wisely.

Parke, is there any applicable thinking in academia on how to overcome the "race to the bottom"-type disincentives for country-level environmental regulation? (e.g., if everywhere else has strict environmental regulation, a given poor country has an incentive to avoid it if the lower costs mean they can produce more fertilizer and thus generate more revenue and employment)

Obviously this applies widely to extractive industries in general, not just phosphate fertilizer... maybe there are parallels from international labor standards?

The most common U.S. center left answer to that question is to include labor and environmental standards as part of trade negotiations.

That's fine with me, but my attention is elsewhere.

The long-term solution to the "race to the bottom" is truly to lift the bottom. Good environmental regulation is a product of middle class democratic politics. There is an anti-trade and isolationist strand in progressive American politics, based on a deep pessimism that things will ever be any better in poor countries. That's not my strand. I hold out more hope for robust middle classes in India and China and Mexico, who can demand good environmental rules.

Recently, I loved reading about the modern Tata apartment design in Mumbia, India. Realistically or not, it generated a daydream about a million young people in Mumbia, wearing hip clothes, eating good (mostly vegetarian) food, living in tiny but fashionable apartments, flirting, watching cool shows and listening to cool music on small electronic devices, enjoying nightclubs, though being too poor to afford a car.

If that is the future we hope for Indian and Chinese youth, it would be just to try to envision something similar for our own children. I really am not sure our grandchildren will have a good world to live in, but if they do, it will probably look like that.

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